|
Inflation,
money growth easing – CB
Central
Bank last week said that inflation and growth in money
supply was easing whilst exchange rate remain stable.
This and other assessments were made following the Monetary
Policy Review for December.
The declining trend in year-on-year inflation that commenced
from July 2008 continued into November. Inflation, as
measured by the year-on-year change in the Colombo Consumers’
Price Index (base=2002) was 16.3 per cent in November
2008, compared to 20.2 per cent in the previous month.
The significant decline in inflation is attributable
to the pass-through of the rapidly declining international
commodity prices, the stringent demand management policies
adopted by the Central Bank and improvements in domestic
supply conditions.
The Central Bank’s continued demand management
policies have been instrumental in curbing the demand
driven inflationary pressures in the economy by containing
the expansion in monetary aggregates and ultimately,
domestic demand. Reserve money has been maintained well
within the stipulated targets for the first three quarters
of 2008 and it is envisaged that the target for the
final quarter would also be achieved. Growth in the
broad money supply has decelerated to single digit levels,
with growth declining to 9.8 per cent by end October
2008, compared to 16.6 per cent at end 2007. The impact
of the slower expansion in monetary aggregates is expected
to be more visible in the coming months with the continued
decline in inflation to acceptable levels. Further deceleration
in inflation would help investors as well as consumers
in their effective decision making process, improving
the growth outlook for the economy.
The country recorded an economic growth of 6.3 per cent
for the third quarter. A notable growth of 12.4 per
cent was observed in the Agriculture sector, while the
Industry and Services sectors expanded by 5.6 and 5.5
per cent, respectively. The overall growth during the
first three quarters has been 6.5 per cent while the
economy is estimated to grow by around 6 per cent in
2008.
The US dollar–rupee exchange rate is stabilising
as a major part of short-term capital flows by way of
Treasury bills and bonds have already flowed out of
the country and the large stock of oil bills for imports
at high petroleum prices have already been settled.
The government is also exploring ways of raising external
finances from alternative sources. These measures are
expected to be announced in January 2009.
The sharp deceleration in the monetary aggregates, together
with recent favourable developments in relation to international
commodity prices are expected to bring down inflation
at a rate faster than previously expected. The monetary
policy announcement dates for 2009 will be published
in the Road Map: Monetary and Financial Sector Policies
for 2009 and beyond, scheduled to be announced on 2
January 2009.
|
